The Deeter Plan

My best laid plans have often blown up in my face, so chances are the idea I had which I mentioned to Pat Kenny last week has lots of snags built in; but today it was discussed on the Pat Kenny show (I wasn’t there for it) and given some additional context.

The thrust of the idea is that having something that is more process or practice based rather than principles based would work better in terms of fast and efficient negotiation.

You can listen to the concept in the link above which has the audio clip, but I’ll lay it out here too. When banks lend money they underwrite a person based on their affordability. My idea is that you re-establish a persons disposable income in their new financial circumstances and use the banks own calculations (albeit this time against them) to ‘re-underwrite’ the loan and in that respect reverse their own criteria against them.

This way if banks are conservative on lending they get conservative payments back on problem mortgages, if they are more generous the debtors may have to come up with a little more, but it still works on affordability because without huge changes everybody can afford the loan they get when it first starts out using Debt Service Ratio models. This method lets the banks fall on their own sword should they choose to do so.

What I would add, is that I’m still working in mortgages not marriages! (HT Helen McCormack)

Comments

  1. Karl,
    I have just published a book with http://www.orpenpress.com as over the last year I have come to believe that the missing ingredient in the conversation is the borrower.
    Maybe this is due to people being intimidated by the process or the Banks. Maybe they are still hoping for some general solution. Your plan has a logical approach and provides a model for borrowers when looking to a solution. The case by case approach being taken by the banks means that borrowers in arrears need to be active in making their individual deal.

    The book is called Making A Deal With Your Bank – An Insiders Guide to Managing Your Mortgage Debt. It’s a non jargon guide to the MARP, MARS , Insolvency and the Bankruptcy processes and answers many of the questions surrounding these processes. It also includes chapters on how to negotiate with your bank and reassessing your Buy to Let Properties.

    Borrowers need to assess which process is right for their situation and seek to achieve this by direct negotiation preferably using an adviser. As I point out in the book knowing your figures is crucial to getting the right deal as you only get one chance at Insolvency. My article in the Irish Independent today has other tips.
    http://www.independent.ie/business/personal-finance/time-to-do-your-homework-on-the-options-pitfalls-and-solutions-for-salvation-29236735.html

    • Karl Deeter

      Hi Fran,

      Thanks for dropping by, I haven’t seen your book? If you’d like to send a copy I’d be delighted to review it on this blog for you and offer it as a reader prize in the Sun newspaper. I think the idea I mentioned is pragmatic and could work, but it is ultimately unworkable because of the inherent double standard which is being adhered to in banking policy, the real point being made (and probably lost) is that if banks were to apply their own standards to themselves the world would be very different. Guess we’ll keep waiting for now!
      thanks
      karl

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